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Chapter 1 Review

Total questions: 43

Worksheet time: 44mins

Name
Class
Date
1.
Payments for advertising, equipment repairs, utilities, and rent are liabilities.
a)
true
b)
false
2.

When an owner withdraws cash from the business, the transaction affects both assets and owner’s equity.

a)
true
b)
false
3.

A negative amount for net worth would reflect more debt than assets, something a creditor would favor.

a)
true
b)
false
4.
The most common type of withdrawal by an owner from a business is the withdrawal of cash.
a)
true
b)
false
5.

After each transaction, the accounting equation must remain in balance.

a)
true
b)
false
6.
A transaction for the sale of goods or services results in a decrease in owner’s equity.
a)
true
b)
false
7.
The accounting equation is most often stated as Assets + Liabilities = Owner’s Equity.
a)
true
b)
false
8.
When two asset accounts are changed in a transaction, there must be an increase and a decrease.
a)
true
b)
false
9.
Keeping separate the financial records for a business and for its owner’s personal belongings is an application of the Business Entity accounting concept.
a)
true
b)
false
10.
When items are bought and paid for at a future date, another way to state this is to say these items are bought on account.
a)
true
b)
false
11.
A withdrawal is an expense.
a)
true
b)
false
12.
Business ethics are the principles of right and wrong that guide an individual in making personal decisions.
a)
true
b)
false
13.
Total assets are the amount the owner has invested in the business.
a)
true
b)
false
14.
An expense is a decrease in owner’s equity resulting from the operation of a business.
a)
true
b)
false
15.
Detailed information about changes in owner’s equity is needed by owners and managers to make sound business decisions.
a)
true
b)
false
16.
Anything of value that is owned.
a)
asset
b)
liability
c)
account
d)
net worth statement
17.
The amount remaining after the value of all liabilities is subtracted from the value of all assets.
a)
asset
b)
liability
c)
owner's equity
d)
net worth statement
18.
A planned process for providing financial information that will be useful to management.
a)
accounting system
b)
accounting
c)
expense
d)
liability
19.
The difference between personal assets and personal liabilities.
a)
owner's equity
b)
personal net worth
c)
expense
d)
revenue
20.
Financial reports that summarize the financial conditions and operations of a business.
a)
accounting system
b)
accounting equation
c)
business plan
d)
financial statements
21.
The difference between assets and liabilities.
a)
equation
b)
liability
c)
equity
d)
asset
22.
A business that performs an activity for a fee.
a)
service
b)
GAAP
c)
creditor
d)
account
23.

Financial rights to the assets of a business.

a)

withdrawal

b)

liability

c)

equities

d)

expense

24.
A business owned by one person.
a)
proprietorship
b)
corporation
c)
GAAP
d)
net worth statement
25.

A record summarizing all the information pertaining to a single item in the accounting equation.

a)

accounting system

b)

account

c)

account balance

d)

accounting

26.
An increase in owner’s equity resulting from the operation of a business.
a)
withdrawal
b)
revenue
c)
capital account
d)
expense
27.

Planning, recording, analyzing, and interpreting financial information.

a)

accounting system

b)

accounting

c)

account balance

d)

accounting balance

28.

An equation showing the relationship among assets, liabilities, and owner’s equity.

a)

accounting

b)

accounting

c)

accounting equation

d)

accounting system

29.
The principles of right and wrong that guide an individual in making decisions.
a)
ethics
b)
equity
c)
business ethics
d)
creditor
30.
The account used to summarize the owner’s equity in the business.
a)
assets
b)
liabilties
c)
capital account
d)
revenue
31.
An amount owed by a business.
a)
creditor
b)
asset
c)
liability
d)
revenue
32.
A decrease in owner’s equity resulting from the operation of a business.
a)
sales
b)
revenue
c)
withdrawal
d)
expense
33.
The name given to an account.
a)
accounting system
b)
account title
c)
GAAP
d)
revenue
34.
A business activity that changes assets, liabilities, or owner’s equity.
a)
accounting
b)
transaction
c)
expense
d)
revenue
35.
Assets taken out of a business for the owner’s personal use.
a)
revenue
b)
expense
c)
liability
d)
withdrawal
36.
A sale for which cash will be received at a later date.
a)
equity
b)
creditor
c)
sale on account
d)
revenue
37.

The use of ethics in making business decisions.

a)

ethics

b)

business ethics

c)

personal net worth

d)

accounting

38.

A formal written document that describes the nature of a business and how it will operate.

a)

business plan

b)

business

c)

proprietorship

d)

withdrawal

39.

The standards and rules that accountants follow while recording and reporting financial activities.

a)

business ethics

b)

ethics

c)

proprietorship

d)

GAAP

40.

A person or business to whom a liability is owed.

a)

creditor

b)

asset

c)

corporation

d)

service business

41.

A formal report that shows what an individual owns, what an individual owes, and the difference between the two.

a)

accounting equation

b)

accounting

c)

net worth

d)

personal net worth

42.

The amount in an account.

a)

accounting system

b)

account balance

c)

transaction

d)

revenue

43.

The Accounting Equation

​ (a)   = ​ (b)   + ​ (c)  

Choose from the below words
Assets
Liabilities
Equity
Money

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